A Word of Warning About Campus Debit Cards

Campus debit cards for students are common, but many of these cards are rife with hidden fees.

Campus debit cards may appear to be an easy, low-cost solution to handling your finances while in college, but students should be aware that many of these cards carry excessive hidden fees. According to a report by the United States Public Interest Research Group (USPIRG), many of the banks behind these cards are taking advantage of students who need them in order to access their financial aid.

There are now almost 900 higher learning institutions that have formed banking partnerships to manage their financial aid programs.

The largest of these is Higher One, a firm with a presence in 520 colleges enrolling 4.3 million students. According to the report, last year Higher One made 80 percent of its total revenue from fees on student aid disbursement cards. These include everything from per-swipe fees, ATM fees, overdraft fees and even inactivity fees if the student does not use the card for more than six months.

A Major Money Drain

“Campus debit cards are wolves in sheep’s clothing,” Rich Williams, one of the co-authors of the USPIRG report, said in a recent press release. “Students think they can access their dollars freely, but instead their aid is being eaten up in fees.”

Although campus debit cards are not required to access a student’s financial aid, many banks market their product directly on colleges’ financial aid websites, often creating the perception of being the only option.

Here are some things students can do to protect themselves:

Remember you have a choice. Although colleges may push you toward their banking service, you can choose how you would like the funds dispersed. This can be either a direct deposit to your own bank or a written check.

Check the fine print. If you’re going to use a campus debit card, at least make sure you understand the fees attached to the account. If you don’t want to do this, you’re probably better off just sticking with your own bank.

Pay attention to the balance: According to one FDIC study, 15 percent of young adult cardholders incur more than 10 overdraft fees a year, at an average of $34 apiece.

Watch ATM fees. Access to fee-free ATM machines for your campus debit card is likely limited, which means you may have to use other ATMs that can charge as much as $5 to withdraw funds.

Don’t take bogus fees lying down. Students who feel they are being fleeced can file a complaint electronically or by phone at 1-800-MIS-USED.

While this should be less of a problem for student veterans who are already established with a bank, these kinds of stories still serve as a reminder to watch out for and to report these kinds of practices, regardless of their source.

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